Which of the Following Statements Is CORRECT

question 23

Multiple Choice

Which of the following statements is CORRECT?

• A) Since debt capital can cause a company to go bankrupt but equity capital cannot,debt is riskier than equity,and thus the after-tax cost of debt is always greater than the cost of equity.
• B) The tax-adjusted cost of debt is always greater than the interest rate on debt,provided the company does in fact pay taxes.
• C) If a company assigns the same cost of capital to all of its projects regardless of each project's risk,then the company is likely to reject some safe projects that it actually should accept and to accept some risky projects that it should reject.
• D) Because no flotation costs are required to obtain capital as retained earnings,the cost of retained earnings is generally lower than the after-tax cost of debt.
• E) Higher flotation costs tend to reduce the cost of equity capital.

Grasp the concept of market efficiency and the conditions required for competitive markets to achieve efficient outcomes.

Apply principles of economic welfare analysis to various market situations.

Describe the impact of supply and demand changes on market surplus.

Analyze welfare implications of market prices and resource allocation.

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Definitions:

Independent Clauses

Sentences or clause types that can stand alone as a complete thought because they have both a subject and a predicate.

Compound Sentence

A sentence that contains at least two independent clauses, often joined by a conjunction or punctuation.

Annotate

To add explanatory notes or comments to a text or diagram, often used for clarification or to provide additional information.

Incoming Mail

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